New businesses bloom amid devastation of downturn
Thousands have started own outfits, often in completely different fields
Going out of business is a sign of the times for Calgary’s economy, as the number of firms that closed for good in 2016 jumped by eight per cent.
Yet, what’s believed to be a record number of companies also started up in the city during the same period.
It’s the yin and yang of the recession, a sudden burst of entrepreneurism taking flight in the wake of a shrinking job market.
“It’s definitely a mixed story, but the fact is we eked out some growth versus the closures,” says Calgary Chamber of Commerce CEO Adam Legge.
“It’s a signal that no matter how hard the economic times, people are still willing to create new companies and new jobs.”
Last year, the city’s unemployment rate surged to a 23-year high and topped 10 per cent. Thousands of Calgarians, particularly in the oilpatch, were handed pink slips as companies downsized.
New statistics released Wednesday show the number of Albertans collecting employment insurance benefits in November reached 96,890, up almost 60 per cent from a year earlier.
Instead of waiting for the job market to improve, or seeing their severance packages and employment insurance run out, many Calgarians decided to start their own companies.
Jackie Rafter, president of career-counselling service Higher Landing in Calgary, says she has encountered many unemployed energy workers who’ve opted to become contractors or consultants, or have started businesses in a completely different field.
“It’s really out of necessity, because they are probably not going to get a full-time job,” she says. “A lot of jobs are becoming permanently redundant in the oilpatch. So these people are really smart and have transferable skills.
“The consultancy thing is on the rise, and most companies — including ourselves — are just hiring people on contracts.”
It’s a curious phenomenon of Alberta’s two-year downturn: new, diverse companies rising out of the embers of a broad recession caused by a global oil price collapse.
City figures show that in 2013, during the last full year of the economic boom, 6,721 new business licences were issued in Calgary.
By 2016, despite the downturn spreading to retail sales, homebuilding, construction and other sectors, the number of new business licences rose by 7,376, a four per cent increase from the previous year.
Katie Nedjelski is one of those Calgarians who lost her job working for an oilsands company last February after spending years in the industry, both in finance and communications roles.
Although she had a couple of job interviews and considered returning to the corporate sector, Nedjelski took a leap in a different direction, relaunching a girls’ underwear company called Girl Gotch that she’d previously acquired.
The company sells an improved design of traditional underwear, with a mission to provide girls with “eco-friendly underwear that stays put.”
After a successful crowdfunding campaign last year that raised 129 per cent of its $8,000 target, Nedjelski was convinced to stay on the path of being her own boss.
“As soon as I did the crowdfunding campaign, I thought this is a full-time job, I need to treat it as a full-time job, it needs to pay me as a full-time job, I need to hire employees and operate it like it’s my job,” says the mother of two, whose husband works in the oilpatch.
“As the months have (gone) by, there’s no way that I will go back to a corporate job now, the more that I’ve realized that I am an entrepreneur and this is way more fulfilling than going downtown every day.”
This doesn’t mean there aren’t obstacles ahead for the thousands of entrepreneurs who’ve started a new company.
The financial risks can be large. The hours are often long. The responsibility can be intense.
The city reports 7,214 businesses closed last year, up more than 500 from 2015 levels.
“The whole mentality of an entrepreneur is very, very different than someone who has worked at a billion-dollar energy producer for the past 20 years,” says Rafter.
“You’ve got to be chief cook and bottle-washer. Starting a business is absolutely not for everybody.”
And then there’s the challenge of trying to kick-start a small enterprise in the midst of a downturn, when many consumers have less discretionary income and most companies are trying to whittle down expenses.
A survey done for the chamber last fall found six in 10 Calgary business operators say they’ve been greatly affected by the current economy.
Only one per cent had a positive view of the local economy, while 46 per cent held a negative view.
Significantly, eight in 10 said Calgary is not going through a normal business cycle, more evidence that we’re facing a broader restructuring of the city’s economy.
What this all speaks to is the city’s economy is evolving and must become more diversified.
With 7,376 new businesses created over the past 12 months, the transition is already underway.